Liquidity providers deposit funds into Notional and receive trading fees from borrowers & lenders (supply-side fees).

Notional is a non-custodial fixed-rate, fixed-term lending protocol built on Ethereum. Notional was founded by Jeff Wu & Teddy Woodward and launched in 2020.

NOTE holders own and govern the protocol. They currently take a cut of the total trading fees paid by borrowers & lenders and all of the COMP incentives from funds deposited to Compound (revenue). Notional’s investors include Coinbase Ventures, Nascent Ventures, 1Confirmation, etc.

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Notional Finance

# Notional Finance Earnings Methodology

## 1. Overview

Earnings represents Notional Finance's net profit, calculated as total revenue minus total expenses on a daily basis. This metric measures the protocol's profitability by capturing fees generated from lending operations and COMP token rewards, then subtracting the cost of user incentives paid in NOTE tokens. The calculation answers the business question: "How much profit does Notional generate daily after accounting for user acquisition costs?"

## 2. Data sources

The calculation relies on several raw blockchain data sources:

- **Blockchain events**: Parsed Ethereum `ReserveFeeAccrued` events from Notional's Router contract, capturing protocol fees from lending operations
- **Token transfer events**: Parsed Ethereum `Transfer` events for NOTE token distributions from the reward contract to users
- **Compound protocol events**: Parsed `DistributedBorrowerComp` and `DistributedSupplierComp` events from Compound V2's Comptroller contract on Ethereum
- **External data**: End-of-day token price feeds from CoinGecko API for USD conversion
- **Token metadata**: Hardcoded mapping of Compound LP tokens (cETH, cDAI, cUSDC, cWBTC) with their corresponding currency IDs and contract addresses

## 3. Step-by-step calculation

### Component A: Revenue from fee accruals
- **Purpose**: Captures protocol fees earned from Notional's lending operations
- **Logic**: Extracts all `ReserveFeeAccrued` events from Notional's Router contract on Ethereum. Each event contains a `currencyId` field and `fee` amount. The currency ID is mapped to specific Compound LP token addresses using an allowlist (currency ID 1 = cETH at `0x4ddc2d193948926d02f9b1fe9e1daa0718270ed5`, currency ID 2 = cDAI at `0x5d3a536e4d6dbd6114cc1ead35777bab948e3643`, etc.). Events are aggregated by day using block timestamp truncation.
- **Key fields**: `block_timestamp` for daily aggregation, `currencyId` for token mapping, `fee` amount representing protocol revenue, `transaction_hash` and `log_index` for deduplication

### Component B: Revenue from COMP rewards
- **Purpose**: Captures COMP token rewards earned by Notional from participating in Compound's liquidity mining program
- **Logic**: Extracts `DistributedBorrowerComp` and `DistributedSupplierComp` events from Compound V2's Comptroller where the recipient is Notional's distributor contract (`0x1344a36a1b56144c3bc62e7757377d288fde0369`). Both borrower and supplier rewards are combined since Notional earns COMP tokens from both lending and borrowing activities on Compound.
- **Key fields**: `block_timestamp` for daily aggregation, `compDelta` representing COMP token amounts earned, `borrower` and `supplier` addresses filtered to Notional's distributor contract

### Component C: Expenses from token incentives
- **Purpose**: Captures the cost of NOTE token incentives paid to users for protocol participation
- **Logic**: Identifies NOTE token transfers from Notional's reward contract (`0x1344a36a1b56144c3bc62e7757377d288fde0369`) to any recipient address. These transfers represent user incentives and are treated as the protocol's primary expense. NOTE token has 8 decimal places, so amounts are divided by 1e8 for proper scaling.
- **Key fields**: `block_timestamp` for daily aggregation, `from_address` filtered to the reward contract, `token_address` filtered to NOTE token (`0xcfeaead4947f0705a14ec42ac3d44129e1ef3ed5`), `value` representing token amounts transferred

### Final aggregation
- **Combining components**: Revenue components (fee accruals and COMP rewards) are combined using union operations, creating a single revenue stream. Token incentives are treated as a separate expense stream.
- **Currency conversion**: All amounts are converted to USD using end-of-day price feeds from CoinGecko. Revenue uses token-specific decimal corrections based on the underlying token standards. NOTE token incentives use CoinGecko prices with the 'notional-finance' identifier.
- **Time aggregation**: All blockchain events are grouped by day using timestamp truncation to daily boundaries. Missing days are filled with zeros to ensure continuous time series.
- **Final calculation**: Daily earnings equals daily revenue minus daily expenses. Revenue includes both protocol fees (converted from various Compound LP tokens to USD) and COMP rewards (converted to USD). Expenses consist entirely of NOTE token incentives (converted to USD). The final metric represents net profit per day.

*This methodology was automatically generated by Token Terminal's methodology analyzer.*

Net profit (also profits, net income, profitability) — revenue remaining after subtracting expenses.

Notional FinanceNOTE

Earnings

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